Motor insurers should stop apologising for premiums

The rise of price comparison websites and demise of conversations with brokers and provider’s sales teams about motor insurance has created a market where consumers know the price of their policy rather than the value the cover offers.

I am sorry to say that the industry only has itself to blame for Labour’s promise at last year’s party conference that it will tackle motor insurance premiums if it sweeps into power.

That promise was clearly down to the fact many voters were sharing their horror at their renewal quote with politicians on the doorstep in the run-up to a general election.

After 13 years in the political wilderness, Labour Party leader Sir Keir Starmer has clearly recognised the wisdom of rattling his sabre in his bid to be handed the keys to Number 10 Downing Street.

At the end of February, in what was undoubtedly a politically prudent move given Conservative Prime Minister Rishi Sunak’s current approval ratings, the Association of British Insurers unveiled a 10-point plan to tackle motor insurance premiums.

The industry ultimately needs to significantly up its game when it comes to explaining the value of motor insurance.

Wisely, the ABI’s plan conveys the fact the industry alone can’t reduce the cost of car insurance.

Steps need to be taken by the government, regulators, and providers if the price of cover is to be pushed downwards, the ABI’s plan points out.

While you couldn’t help but applaud the political savvy of the plan, I couldn’t help but wonder whether this is a wise move from the ABI or whether it could further erode the public’s trust in personal lines insurers?

Fat cats

Headlines generated by the ABI’s plan – such as GB News’ “Car insurance prices could plummet with ‘new strategy’ aiming to slash premiums for British drivers” – simply reaffirm many a motorist’s mistaken belief about how the industry operates.

Cash-strapped drivers think personal lines insurance chiefs are fat cats who can race down country lanes in their fossil fuel guzzling cars without having to worry about the cost at the petrol pump.

Most people who are debating whether it would be cheaper to heat their homes by burning £5 notes rather than turn the central heating on didn’t bother to read last year’s insurance company results and they won’t be ploughing through the ABI’s plan either.

What Labour’s sabre rattling and the ABI’s plan highlights is the industry ultimately needs to significantly up its game when it comes to explaining the value of motor insurance.

Rather than come up with a fresh plan, I would suggest the ABI look at past attempts to explain value to motorists sick and tired of the soaring cost of staying on the road.

A decade ago, when Huw Evans was in charge of the trade body and long before he moved onto become KPMG’s head of insurance, the ABI delivered a breakdown of outgoings as a percentage of premium income for motor insurance. 

The breakdown highlighted that outgoings back then were more than 100% and personal injury claim costs made up the largest proportion of motor insurance claim costs, with whiplash claims accounting for a massive 20% of premium income.

As well as toadying up to MPs, it is time for the industry to shout about how it is driving out unnecessary costs, pricing risk accurately, and being ever more transparent in the process through channels consumers in 2024 engage with.

Rather than just sending an email with a renewal cost that has leapt upwards, insurers need to show they understand what matters to the customer – whether that is a single mother who relies on her car to get her children to school or a tradesman who can’t earn cash without his van.

To shift the focus from price, the motor insurance industry needs to grasp the customer’s perception of the content of the product and what is important to them.

Insurers need to spell out why the premium is required to secure the safety net that is suitable for that motorist’s needs. 

The industry needs to get to a place where renewal quotes don’t shock the customer as they are confident the price being charged for the insurer’s product and services will deliver what they need from it.